Big mortgage, reduction in salary

arse_neck

Hello everybody. I wonder if anyone can help me.

I have a mortgage of around 135k on a property which is probably worth around 210-220k. This was taken out in 2004, and is half discounted variable and half tied in until 2009 – both halves are with Britannia, which basically means I'm stuck with them for now.

At the time of arranging the mortgage, I was earning around 47k in total. But the wife and I are looking to start a family, which would mean me getting a new job (closer to home) and pulling in more like 27k.

This is our dream house, and is ideal for bringing up a family, so downsizing is not practical. Can anybody suggest a way of rejigging the mortgage to make it more affordable, without being penalised for redemption?

Also, when my tie-in period expires, does anybody know how likely I am to be able to get a competitive new mortgage on these earnings? Does the amount of equity in the property count for anything?

Any ideas gratefully received.

Stuart

PoorDave

Can you overpay without penalty? If so, i suggest a period of belt tightening and paying off as much mortgage as possible beforehand! (Assuming your still on the 47k). How does net income compare to outgoings?

Does your wife work? Why would you have to get a new job, and why would it earn you so much less?

arse_neck

More like 40k now, but have been overpaying as and when I can. Have a few credit card debts etc (all on 0pc), and outgoings don't leave me with much over come end of month. Also, I have some potential to sell stuff (motorbike etc) when time comes, to make a few decent-sized overpayments. But big mortgage is set to remain.

Cut in earnings is necessary because at present I have a three hour round trip daily commute. For quality of life and to be fair on my wife, I want to get a job 10 minutes down the road when junior arrives. But of course this comes at a price.

Mrs does work, but earns next to nothing. Guess she could go part-time if needs be. But much of this would probably be swallowed up by baby bills, I imagine.

My concerns surround what my mortgage provider would make of all this.

UK007BullDog

The only thing to help you would be to go interest only if you are currently on a repayment mortgage.

As you are tied in there is no way to remortgage you without paying the penalty fees. Interest rates are also higher than when you originaly mortgaged up. Also if your income goes down you might have a problem remortgaging in the future as the income is too low (even though Abbey just lanched a 5 x income multiple) or the affordability will not fit due to the baby as a cost factor.

It is commendable of you wanting to be around when your child is born. However from an income point of view it would be a wrong move for you to give up a high paid job, especially if your wife earns next to nothing. Reality is that the mom would stay at home the first years anyway. So there would really be no need for you to give up your job. And you need the money because babies are expensive!!!!

silvercar

Which is more important, keeping the house or a shorter commute? From the figures you post, I don't think you can afford to do both.

That salary drop is too large. Either look for a different job nearer home or stick with the good money.

freda

So, at the moment you're ona joint income of 47k, and will be till the baby is born? A repayment mortgage of £135k should be costing you c.789 per month, on an income of what - £2.7k per month? You should be able to save LOADS on this, surely? Some people fall pregnant the minute they start trying, but others take literally years, so you could have along time to make a significant dent in the mortgage debt.

I'd suggest taking a trip to the debt free wannabe board and drawing up a statement of affairs for them to comment on and give you ideas where you could be saving money. I reckon if you really look long and hard at your expenditure, you should have a surplus of up to 1k per month - minus the cc debts, obviously - how much are they?

So thats step one - agressively cut back on spending in order to overpay and reduce the balance on the debt. Sell things and make lump sum payments sooner rather than later, to avoid paying more interest than needed.

Step two, when you know your wife will lose her income, look at maybe extending the term of the mortgage, or going to interest only. But this must only be a short term measure, till your wife goes backto work, or you'll be paying your mortgage when you retire!

Other things to look at - what would you need to do, skills/qualifications/experience wise in order to pull in a higher salary if you were to move to work locally. Start acting on that now. Start making contacts in local businesses etc.

Can either of you take on any part time work before your wife gets pregnant, in order to increase the overpayments on the mortgage and get rid of the debt. Remember when you have a reduced salary, you are less likely to get the 0% deals to continue tarting the debts - don't let yourself get backed into a corner with them a few years down the road when you find yourself paying ridiculously high APRs.

Its all about increasing income, reducing expenditure and blitzng the debt agressively while you can.